Diversified fuel producer CONSOL Energy Inc. (CNX) announced that its Bailey Preparation Plant in Southwestern Pennsylvania has resumed coal production. The temporary disruption in production was due to partial structural failure in a newly installed belt system. The conveyor belt system plays an important role in the entire process as it helps to transport the coal produced from the mines.
The failure resulted in the suspension of longwall production from the company's Bailey and Enlow Fork mines. However, this temporary outage did not impact the sales guidance for the third quarter. CONSOL Energy reiterated its third-quarter sales guidance at 13.4 to 13.9 million tons.
Bailey and Enlow Fork Mines produce thermal coal. The combined production from these two mines was 16.6 million tons out of its total production of 56 million tons in 2012.
CONSOL Energy has nearly 4.5 billion tons of proven and probable coal reserves and 96% of its coal production comes from its underground operations. CONSOL resorts to longwall mining techniques where the geology is favorable. Longwall mining techniques increase the production output in comparison to other conventional mining techniques. A major portion of CONSOL Energy’s coal is produced using longwall techniques.
The recovery in natural gas prices could revive the demand for thermal coal. However, the present supply glut has put a downward pressure on coal prices. Having said that, the receding stockpiles are likely to create fresh demand for thermal coal. Moreover, the demand for the premium variety of coal is expected to improve, as a report from World Steel Association suggests a 3% yearly increase in steel demand in 2013 and 2014.
CONSOL presently carries a Zacks Rank #4 (Sell). Other operators in the sector having a favorable rank and worth considering are Alliance Resource Partners L.P. (ARLP), Alliance Holdings GP, L.P. (AHGP) and Oxford Resource Partners, L.P. (OXF). All of them presently carry a Zacks Rank #1 (Strong Buy).
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